Healthcare Spending

The Obama administration released data Wednesday from more than 3,000 American hospitals that receive Medicare payments for the 100 most common medical procedures, giving the public a first-ever view into how the country’s $2.87 trillion medical industry works.

The data show vastly different charges from hospitals for performing the very same procedure. 

For example, being admitted for chest pain costs an average of $2,459 if it's treated at Lake Whitney Medical Center in Whitney, Texas, but $81,083 at Bayonne Hospital Center in Bayonne, N.J.

Treatment for high blood pressure ranges from $2,957 to $68,961. Treatment for hardened arteries can cost anywhere from $3,070 to $69,197. Joint replacements may vary in price by more than $200,000. 

These costs are covered by a variety of sources, including private insurance, Medicare, Medicaid, patient co-pays, and other sources, and are often negotiated without the patient’s knowledge.

Perhaps the best explanation for the pricing discrepancies is that hospitals can charge, in essence, whatever people will pay, considering that medical treatment rarely offers the consumer a chance to shop around.

In fact, for-profit hospitals billed Medicare 29 percent more on average than government-owned or nonprofit hospitals, according to an analysis from The Washington Post.

While hospital pricing has typically been kept secret, the veil is lifting, hopefully creating an open and competitive market in which a patient can get proper care without unnecessary expenses.

The price transparency promoted by the "Obamacare" healthcare bill is one way the government is trying to rein in the ever-expanding cost of medical care in America.

Getting treatment for a medical condition shouldn’t break the bank, but recent research shows that an increase in treatment has caused the greatest recent jump in U.S. healthcare costs.

A 50 Percent Rise in Healthcare Costs?

More people being treated for specific medical conditions, along with higher spending per patient, accounted for a 50.8 percent rise in healthcare spending from 1987 to 2009, according to new research published in the journal Health Affairs

The doubling of the U.S. obesity rate contributed to a 10 percent price increase, and greater treatment intensity was responsible for nearly 12 percent of that spending.

“In order to determine ways to reduce the rate of growth in health care spending, we must first have a clear understanding of what factors account for the increase,” lead researcher Kenneth E. Thorpe, chair of the Department of Health Policy and Management at Emory's Rollins School of Public Health, said in a press release.

However, two other studies published in the same journal said that numerous factors are actually contributing to a decline in healthcare spending to the tune of $770 billion.

The drop, according to researcher David Cutler, a health economist at Harvard University, is due to the growing availability of generic drugs, more efficient care, and higher out-of-pocket costs for patients. The largest single explanation for the decrease, the study authors said, is the recession of 2007 to 2009, which accounted for a 37 percent drop in healthcare spending. 

Another study in Health Affairs said that we should be cautiously optimistic about this spending reduction because a review of data from 10 million insurance enrollees found that a decrease in worker benefits and layoffs accounted for one-fifth of the decrease in spending.

Preventative Medicine Is Still the Best Medicine

To help curb runaway healthcare spending, Thorpe said policy makers should focus on increasing preventative care. 

“We also have to look at whether the more intensive treatments yield improvements in morbidity and mortality,” he said.

The cheapest way to navigate the current healthcare system is to not use it. While you can’t prevent everything, taking care of yourself before problems arise is the easiest way to save big. This includes getting regular exercise, eating a balanced diet, keeping stress to a minimum, and drinking plenty of water every day. See the links below to get started.

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